Mahatma Gandhi, the civil rights leader who led India to freedom from British rule, is to be celebrated with a statue in Parliament Square, the Chancellor has announced.

Gandhi outside No 10 Downing Street

The spiritual leader will stand alongside former South African president Nelson Mandela and the wartime leader Winston Churchill, who once called him a "half-naked fakir".

Announcing the tribute during a trip to India to help improve relations between the countries, George Osborne said: "As the father of the largest democracy in the world, it's time for Gandhi to take his place in front of the mother of parliaments.

"He is a figure of inspiration, not just in Britain and India, but around the world. New Indian prime minister Modi invoked his memory in his inaugural speech to parliament.

"I hope this new memorial will be a lasting and fitting tribute to his memory in Britain, and a permanent monument to our friendship with India."

Sculptor Philip Jackson, whose works include the Bomber Command memorial and the statues of Bobby Moore at Wembley and Sir Matt Busby at Old Trafford, has been approached.

The Nelson Mandela statue in Parliament Square

The statue will be funded by sponsors and charitable donations and it is hoped will be in place next year - the 100th anniversary of Gandhi's return to India to begin the battle for an end to British rule.

In 2007, former London Mayor Ken Livingstone called for a statue of Gandhi, who studied in London, to be erected.